CalPERS Kicks Hedge Funds To The Curb
Sep 16 2014 | 5:51am ET
Hedge funds have received a huge blow from the largest public pension plan in the U.S.
The California Public Employees’ Retirement System has decided to eliminate its hedge fund program, known internally as the Absolute Return Strategies (ARS) program, as part of an ongoing effort to reduce complexity and costs in its investment program.
The staff recommendation, supported by the investment committee, will exit 24 hedge funds and six hedge fund-of-funds valued at approximately $4 billion.
“We are always examining the portfolio to ensure that we are efficiently and cost-effectively achieving our risk-adjusted return goals,” said Ted Eliopoulos, CalPERS interim chief investment officer. “Hedge funds are certainly a viable strategy for some, but at the end of the day, when judged against their complexity, cost, and the lack of ability to scale at CalPERS’ size, the ARS program is no longer warranted.”
Following the 2008 global financial crisis, CalPERS began examining ways to ensure it was less susceptible to future large drawdowns. The system restructured its investment operations, improved its internal oversight and control functions, and refocused some of its investment programs. In February 2014, the CalPERS Board adopted a new asset allocation mix that reduces risk to the portfolio, while still being able to achieve its return goal of 7.5%. CalPERS earned 18.4% during the 2013-14 fiscal year and has averaged a 12.5% return for the past five years and an 8.4% return for the past 20 years.
In September 2013, the CalPERS Board adopted a set of Investment Beliefs to inform the strategic decision making of the System. Investment Belief 7 states that “CalPERS will take risk only where we have a strong belief we will be rewarded for it.” Investment Belief 8 notes that “Costs matter and need to be effectively managed.”
CalPERS will spend approximately the next year strategically exiting current investments in a manner that best serves the interests of the portfolio. Existing ARS staff will be reassigned within the Investment Office.
“The staff dedicated to our program have worked diligently and we will ensure that their talent can continue to help CalPERS meet its investment objectives,” said Eliopoulos.
CalPERS has approximately $300 billion in assets.
Sep 16 2014 | 5:51am ET
Hedge funds have received a huge blow from the largest public pension plan in the U.S.
The California Public Employees’ Retirement System has decided to eliminate its hedge fund program, known internally as the Absolute Return Strategies (ARS) program, as part of an ongoing effort to reduce complexity and costs in its investment program.
The staff recommendation, supported by the investment committee, will exit 24 hedge funds and six hedge fund-of-funds valued at approximately $4 billion.
“We are always examining the portfolio to ensure that we are efficiently and cost-effectively achieving our risk-adjusted return goals,” said Ted Eliopoulos, CalPERS interim chief investment officer. “Hedge funds are certainly a viable strategy for some, but at the end of the day, when judged against their complexity, cost, and the lack of ability to scale at CalPERS’ size, the ARS program is no longer warranted.”
Following the 2008 global financial crisis, CalPERS began examining ways to ensure it was less susceptible to future large drawdowns. The system restructured its investment operations, improved its internal oversight and control functions, and refocused some of its investment programs. In February 2014, the CalPERS Board adopted a new asset allocation mix that reduces risk to the portfolio, while still being able to achieve its return goal of 7.5%. CalPERS earned 18.4% during the 2013-14 fiscal year and has averaged a 12.5% return for the past five years and an 8.4% return for the past 20 years.
In September 2013, the CalPERS Board adopted a set of Investment Beliefs to inform the strategic decision making of the System. Investment Belief 7 states that “CalPERS will take risk only where we have a strong belief we will be rewarded for it.” Investment Belief 8 notes that “Costs matter and need to be effectively managed.”
CalPERS will spend approximately the next year strategically exiting current investments in a manner that best serves the interests of the portfolio. Existing ARS staff will be reassigned within the Investment Office.
“The staff dedicated to our program have worked diligently and we will ensure that their talent can continue to help CalPERS meet its investment objectives,” said Eliopoulos.
CalPERS has approximately $300 billion in assets.